Despite the fact that only 35% to 40% of employers offer LTD coverage as an employee benefit, growing a long-term disability customer base has become increasingly more difficult.
This is largely due to the fact that carriers tend to fight over existing business creating premium churn, rather than working to grow the market with new premium sales. In fact, over the last 6 years alone, only 3 of the top 10 disability insurance providers have actually grown their in-force cases, reflecting lackluster growth in a market full of potential new sales opportunities.
The way carriers underwrite and price business may be one of the reasons for this lack of sales growth and constant business churn. While the technology and tools of underwriting have improved over the years, the basic methods for selecting and pricing risk have changed very little. Though actuaries are trying to better pinpoint pricing, the census and review of the business have remained very much the same since 1978.
To determine a premium pricing quote rate on cases, underwriters currently use 3 main sources of information, including industry and census demographics and a discount program. There are several ways that carriers can improve this process for underwriters and increase broker efficiency in delivering products to the market.
Leverage intellectual capital to match employee groups with coverage plans. Over the years, insurance providers have learned which LTD coverage plans work better for a variety of specific employee groups such as those in manufacturing and health care. Because of this knowledge, underwriters and/or field sales personnel should be able to more effectively match coverage plans with industry and demographic groups and price accordingly. This simple pricing strategy could be used to enhance sales.
Take advantage of publicly available data. Another tactic to consider when targeting new cases and developing pricing is to utilize existing publicly available data on individuals as well as groups. This information is available on the Internet or for purchase from a variety of outlets. Consumer-oriented and catalog companies already use demographic data, credit scores, household information and many other sources to target customers. Why shouldn’t insurance providers do the same?